Eric A. Hanushek and Dongwook Kim
Abstract
Human capital is almost always identified as a crucial ingredient for growing economies, but empirical investigations of cross-national growth have given little attention to measurement issues-typically just relying on some available measure of the quantity of schooling attained. This paper concentrates on the importance of labor force quality, measured by cognitive skills in mathematics and science. By linking international test scores across countries, a direct measure of quality is developed, and this proves to have a strong and robust influence on growth. One standard deviation in measured cognitive skills translates into one percent difference in average annual real growth rates-an effect much stronger than changes in average years of schooling, the more standard quantity measure of labor force skills. The estimated growth effects of improved labor force quality are very robust to the precise specification of the regressions and hold when various sets of Fast Asian countries are excluded from the analysis. The use of measures of quality significantly improves the predictions of growth rates, particularly at the high and low ends of the distribution· Cognitive skill differences are not, however, the same as differences in resources devoted to schools. Ile importance of quality thus implies a policy dilemma, because production function estimates indicate that simple resource approaches to improving cognitive skills appear generally ineffective.